The Greater Memphis Chamber announced last month that it wants its members to do at least 300 new contracts with minority- and women-owned businesses and 300 new contracts with locally owned small businesses.
The 600 contract initiative is part of the chamber’s supplier diversity collaborative which includes several efforts to “mak(e) it easy to do the right thing.”
Chamber executives deserve some credit for trying to address the issue, but there are at least three signs this initiative won’t do much for black businesses.
- There are no specific goals for black businesses, which in 2012 earned less than one percent of revenues citywide.
- The chamber isn’t tracking the dollar amount of the contracts.
- The definition of small business — fewer than 100 employees, regardless of revenue — defies logic.
In Memphis, black families earn $32,000 less than white families, $34,562 to $66,225. It’s no wonder that this is the second poorest large metro area in the nation and that the burden of poverty falls hardest on black residents.
But unlike a job, a business can be passed to the next generation. Business ownership is a wealth-building tool. Black families, on average, have 6 cents in wealth for every $1 white families have.
The importance of strong black businesses surfaced in the last speech Dr. Martin Luther King Jr. would ever give. On April 3, 1968, he called for the community to back black-owned businesses and shun white businesses that didn’t employ black people. He called for boycotts of four white-owned businesses “because they haven’t been fair in their hiring policies.”
“We’ve got to strengthen black institutions.”
Dr. Martin Luther King Jr., April 3, 1968
“We’ve got to strengthen black institutions,” he said at Mason Temple.
But nearly 50 years after Dr. King was assassinated, black-owned businesses are still on the economic margins. And the chamber’s latest initiative is unlikely to help. Here’s why.
1. No specific goals for black-owned businesses
Memphis is a majority black city. Shelby County is also majority black. The nine-county metro area is home to more black people than white people.
Disparity studies dating back to the 1990s show that while all non-white and women-owned businesses are under-used, black-owned businesses are the most under-used.
Last year, a federal report showed that black businesses received .87 percent of business receipts citywide. The problem is race-specific, yet the chamber has chosen not to set race-specific goals.
Do they want 63 percent of the 300 MWBE contracts to go to black businesses? That would match the percentage of the city’s population that’s black. Or 46 percent, which would match the black metro area population? Or 54 percent, which would match the black county population?
There’s not even a goal for a dollar amount, a decision defended by Shea Flinn, a senior vice president at the chamber.
What if the goal was $10 million and one large company signed a $10 million contract with a single black-owned firm? Flinn asked. That wouldn’t exactly encourage other chamber businesses participate in the initiative.
That’s not a good reason.
The chamber could have set a goal internally but not publicize it. That way, chamber members wouldn’t know until the end of the year whether the goal was met.
Here’s a good reason not to set a goal: No goal means anything can be called a success.
Here’s a good reason not to set a goal: No goal means anything can be called a success.
The chamber’s initiative lumps black, Asian, Latino, Native American and white women in one pile, even though it’s black businesses specifically that need the most attention.
Race-neutral solutions can’t solve race-specific problems.
2. Contract amounts won’t be tracked
At the end of the year, the chamber won’t know whether the initiative created $3 million worth of new business or $3,000 worth of new business for black companies — because they chose not to ask.
All participating companies will fill out an online form, but the form doesn’t ask how much the contract was for.
Future iterations of the program might ask for dollar amounts, Flinn said.
There’s no good reason to delay tallying the money. If it’s true that you measure what matters, what does the chamber’s choice NOT to measure the amount of the contracts mean?
3. Illogical definition of locally owned small businesses
The chamber’s definition of small business undermines the spirit of the initiative.
Municipal governments often set a revenue threshold to be designated as a LOSB (locally owned small business) — say, annual revenues under $2 million.
The chamber chose not to set a revenue threshold, but it did set a number of employees: Fewer than 100.
By that definition, the second fastest growing company in the Memphis area is a small business. The commercial construction firm Grinder, Taber and Grinder has 65 employees and $125 million in gross revenues in 2015.
Grinder will almost certainly not apply to be counted in the chamber’s MWBE/LOSB initiative, but it could.
In case it’s not clear: Locally owned small businesses are businesses owned by white men.
While extensive and expensive disparity studies are required to justify municipal MWBE programs, there is no data that indicates that white men have been discriminated against in the public or private sector.
The chamber’s choice to include LOSBs in this program feels like an attempt to pacify those who are annoyed by race- or gender-focused initiatives.
My repeated use of the word choice is intentional.
The Chamber could ask its members to sign 300 new contracts with black-owned businesses.
It did not — and that’s a choice.
The Chamber could say it wants its members to do at least $3 million in business with black-owned businesses in 2017.
It did not. That is a choice.
Flinn said he avoids using the word racism to when discussing the chamber’s diversity efforts, because he doesn’t want to put anyone (read: white business owners) on the defensive.
That is a choice.
“If 70 percent of your population is being locked out of the economy… that is not sustainable.”
Greater Memphis Chamber senior vice president Shea Flinn, on minority and women-owned businesses
“If 70 percent of your population is being locked out of the economy,” said Flinn, referring to women and people of color, “that is not sustainable.”
I’ve said versions of the same thing too, but I’m no longer sure it’s true.
For some people, the Memphis economy works just fine. In fact, it makes them rich.
Here’s one bit of proof. Every year, the Memphis Business Journal publishes the Book of Lists. One list is the top 100 private companies in the Memphis area, based on revenue. (There are no black-owned companies on this list.)
Take just the top 25 businesses on this list. In 2015, those businesses self-reported revenues of more than $17 billion — with a B.
The economic inequality that shows up in struggling black businesses is largely the result of racist business practices that date back to slavery.
These practices don’t require individual racists. The economic exclusion of black businesses requires one thing: Maintenance of the status quo. As long as business owners do what they’ve always done, Memphis will get what it has.
“We have a remarkably silo-ed community,” acknowledges Flinn, who is senior vice president for the chamber’s Chairman’s Circle, the top echelon of chamber members.
“One of the goals of the Chairman’s Circle is to tear those silos down.”
This too is a choice.
Chamber officials are choosing to ask white businesses to do business with minority, women and small businesses that some may have previously overlooked.
“This is the beginning,” Flinn said. “This is not the end.”